First Half 2014 Financial Results 21 July 2014€¦ · First Half 2014 Financial Results ......

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\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ First Half 2014 Financial Results 21 July 2014

Transcript of First Half 2014 Financial Results 21 July 2014€¦ · First Half 2014 Financial Results ......

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First Half 2014 Financial Results

21 July 2014

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The past performance of Keppel REIT is not necessarily indicative of its future performance. Certain

statements made in this presentation may not be based on historical information or facts and may be

“forward-looking” statements due to a number of risks, uncertainties and assumptions. Representative

examples of these factors include (without limitation) general industry and economic conditions, interest

rate trends, cost of capital and capital availability, competition from similar developments, shifts in

expected levels of property rental income, changes in operating expenses, including employee wages,

benefits and training, property expenses and governmental and public policy changes, and the continued

availability of financing in the amounts and terms necessary to support future business.

Prospective investors and unitholders of Keppel REIT (Unitholders) are cautioned not to place undue reliance

on these forward-looking statements, which are based on the current view of Keppel REIT Management

Limited (as manager of Keppel REIT) (the Manager) on future events. No representation or warranty, express

or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or

correctness of the information, or opinions contained in this presentation. None of the Manager, the trustee

of Keppel REIT or any of their respective advisors, representatives or agents shall have any responsibility or

liability whatsoever (for negligence or otherwise) for any loss howsoever arising from any use of this

presentation or its contents or otherwise arising in connection with this presentation. The information set

out herein may be subject to updating, completion, revision, verification and amendment and such

information may change materially. The value of units in Keppel REIT (Units) and the income derived from

them may fall as well as rise. Units are not obligations of, deposits in, or guaranteed by, the Manager or any

of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the

principal amount invested.

Investors have no right to request the Manager to redeem their Units while the Units are listed. It is

intended that Unitholders may only deal in their Units through trading on Singapore Exchange Securities

Trading Limited (SGX-ST). Listing of the Units on SGX-ST does not guarantee a liquid market for the Units.

Important Notice

2

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Keppel REIT

1 Based on market closing unit price of $1.28 on 30 June 2014.

Portfolio of ten quality Premium Grade and Grade

A office assets, tenanted to established corporate

tenants well-diversified across various business

sectors

1

4

3

5

Total portfolio value of more than $7.2 billion

Total NLA of approximately 3.1m sf as at

30 June 2014

Market capitalisation of $3.6 billion1 as at

30 June 2014

Strong sponsorship by Keppel Land Limited

2 Premium office buildings located in the prime

CBDs of Singapore and Australia, both countries

with AAA sovereign ratings

6

3

Marina Bay Financial Centre,

Singapore

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Marina Bay Financial Centre

Phase 1 (33.3% interest)

Prudential Tower (92.8% interest) *Divestment expected to be completed

in 3Q2014

One Raffles Quay

(33.3% interest)

Ocean Financial Centre

(99.9% interest)

Bugis Junction Towers

Singapore Properties

Australia Properties

77 King Street Office

Tower, Sydney

275 George Street,

Brisbane

(50% interest)

8 Chifley Square,

Sydney

(50% interest)

Old Treasury Building Office

Tower, Perth (50% interest)

* Expected completion in 2H 2015

8 Exhibition Street,

Melbourne

(50% interest)

Premium Office Buildings located in the

Prime CBDs of Singapore and Australia

4

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\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ 1. Key Highlights

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Bugis Junction Towers,

Singapore

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1H 2014 Key Financial Highlights

» 18% y-o-y to $78.7 million

» Stronger performance from Ocean Financial Centre and Prudential Tower, and additional contribution from 8 Exhibition Street

Net Property Income

6

» 14% y-o-y to $94.1 million

Property Income

» 3% y-o-y to $108.3 million

Distributable Income

» Distribution yield of 6.1% for 1H 2014

Distributable Yield

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1H 2014 Key Capital Management Highlights

» Weighted average term to maturity at 3.6 years

» As at 1H 2014, 33% and 16% of borrowings due in 2015 and 2016 respectively have been refinanced early

Weighted Average Term to Maturity of Borrowings

» Healthy interest coverage ratio of 5.2 times

Interest Coverage Ratio

7

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1H 2014 Key Portfolio Highlights

Singapore Portfolio

» Maintained committed occupancy of 97.9%

Australia Portfolio

8

» Average committed occupancy of 99.8%, higher than the Singapore core CBD occupancy of 95.8%

» Announced the divestment of its 92.8% interest in Prudential Tower for $512 million

» 4.5% premium to the latest valuation of $490 million

» 46.7% premium to the original purchase price of $349.1 million

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1H 2014 Key Portfolio Highlights

» Average committed occupancy at 99.4%

» Proactive leasing strategy with forward renewals of approximately 164,000 sf of attributable NLA

Tenants from the banking, insurance and financial services, telecommunications and multimedia, accounting and consultancy services as well as real estate and property sectors

» Tenant retention rate of 87% in 1H 2014

» Maintained healthy weighted average lease expiry (WALE)

8.5 years for its top ten tenants (by NLA)

6.2 years for its overall portfolio (by NLA)

Overall Portfolio

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Ocean Financial Centre,

Singapore

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Net property income 18.0% y-o-y to $78.7 m

1H 2014 1H 2013

Property Income $94.1 m $82.6 m

Net Property Income $78.7 m $66.7 m

Share of Results of Associates $30.2 m $30.4 m

Distributable Income to Unitholders1 $108.3 m $105.1 m

Distribution Per Unit

- For the Period 3.87 cents 3.94 cents

Distribution Yield 6.1% 6.1%

1 The distributable income to Unitholders is based on 100% of the taxable income available for distribution.

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$82.6m

$66.7m

$30.4m

$105.1m $94.1m

$78.7m

$30.2m

$108.3m

Property Income Net Property Income Share of Results of Associates

Distributable Income to Unitholders

1H 2013 1H 2014

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As at 30 June 2014 As at 31 Mar 2014

Non-current Assets $6,716 m $6,666 m

Total Assets $6,884 m $6,785 m

Borrowings1 $3,117 m $3,060 m

Total Liabilities $2,972 m $2,893 m

Unitholders’ Funds $3,910 m $3,890 m

Net Asset Value (NAV) Per Unit $1.40 $1.39

Adjusted NAV Per Unit2 $1.38 $1.37

1 These include borrowings accounted for at the level of associates and excludes the unamortised portion of upfront fees in relation to the borrowings. 2 For 31 March 2014, this excludes the distribution paid in May 2014. For 30 June 2014, this excludes the distribution to be paid in August 2014.

Balance Sheet

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Distribution Period 1 April 2014 – 30 June 2014

Distribution Per Unit (DPU) 1.90 cents

Distribution Timetable

Trading on “Ex” Basis Friday, 25 July 2014

Books Closure Date Wednesday, 30 July 2014

Distribution Payment Date Thursday, 28 August 2014

2Q 2014 Distribution Per Unit

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8 Exhibition Street,

Melbourne

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Capital Management

Loans Due in 2015

Early refinanced 33%

$275 million

All-in Interest Rate

2.20%

Loans Due in 2016

Early refinanced 16% $75 million

Weighted Average Term to Expiry

3.6 years

Percentage of Assets Unencumbered

75% or $5.5 billion of property portfolio

Borrowings on Fixed-rate

67% of borrowings

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» Proactive capital management strategy

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Capital Management

As at 30 June 2014

Gross Borrowings $3,117 m

Aggregate Leverage 42.8%

Interest Coverage Ratio 5.2 times

16

550

404

711 715

387

275

75

350

0

100

200

300

400

500

600

700

800

900

2014 2015 2016 2017 2018 2019 2020

Millions Debt Maturity Profile

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\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ 4. Portfolio Analysis

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Portfolio Committed Occupancy

Australia

97.9%

Singapore

99.8%

1 Source: CBRE 18

» Overall portfolio committed occupancy of 99.4%

100.0% 100.0% 100.0% 99.4% 100.0%

97.0%

100.0% 100.0%

92.1%

99.4%

Bugis Junction Towers

MBFC Phase 1 One Raffles Quay

Ocean Financial Centre

Prudential Tower

8 Chifley Square

8 Exhibition Street

275 George Street

77 King Street Portfolio

Singapore core CBD occupancy at 95.8%1

Overall

99.4%

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80%

85%

90%

95%

100%

2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

Keppel REIT Historical Occupancy

Keppel REIT Occupancy Singapore Core CBD Occupancy

Keppel REIT Historical Occupancy

1 Source: CBRE 19

» Keppel REIT’s portfolio occupancy has strengthened 0.3% y-o-y, and is consistently above Singapore’s Core CBD occupancy levels

Keppel

REIT

95.8%1

99.4% 99.1%

97.0%

97.9% 97.9%

Singapore

Core CBD

94.9%

2009 2010 2011 2012 2013 2014

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Lease Portfolio

Weighted Average Lease Expiry (WALE)

Top T

en T

enants

WA

LE

Port

folio W

ALE

8.5 years1

6.2 years2

1 Excluding the acquisition of the Old Treasury Building office tower, the top ten tenants WALE will be 6.4 years. 2 Excluding the acquisition of the Old Treasury Building office tower, the portfolio WALE will be 5.1 years. 3 Long-term leases are those with lease terms to expiry of at least five years.

20

» Top ten tenants, accounting for 41% of portfolio NLA, have a long WALE of 8.5 years1

Long-term leases 42%

Short-term leases 58%

Portfolio with Long-Term Leases3 by NLA

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Lease Expiry Profile

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» In 2Q 2014, approximately 93,000 sf of attributable NLA were renewed and leased to tenants from the banking, insurance and financial services, telecommunications and multimedia, fund management as well as legal sectors

» Only 0.7% (~21,000 sf) of Keppel REIT’s portfolio (by NLA) remains to be renewed, while 6.1% (~189,000 sf) remains to be reviewed for the remaining of 2014

0.7%

7.9%

20.2%

17.2%

9.8%

15.1%

6.1%

9.2%

4.8% 4.3%

8.9%

0.2%

2014 2015 2016 2017 2018 2019

Portfolio Lease Profile (by NLA) as at 30 June 2014

Leases Expiring as a Percentage of Total Portfolio NLA Rent Review as a Percentage of Total Portfolio NLA

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Tenants Diversified across Various Business Sectors

1 Tenants with multiple leases are accounted as one tenant

Number of tenants

262

22

Accounting & consultancy services, 5.6%

Banking, insurance & financial services, 47.6%

Government agency, 2.4% Hospitality & leisure, 1.8%

IT services & consultancy, 2.4%

Others, 2.3%

Real estate & property services, 6.4%

Services, 4.4%

Shipping & marine services, 0.3%

Energy & natural resources, 8.2%

F&B, 1.2%

Legal, 8.5%

Telecommunications & mulitimedia, 8.2%

Retail (Exclude F&B and Services), 0.8%

1

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Tenant Base

Ocean Financial Centre

Marina Bay Financial Centre Phase 1

One Raffles Quay

275 George Street

8 Exhibition Street

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» Top ten tenants account for approximately 41% of portfolio NLA, diversified across 5 buildings

2.5%

3.0%

3.1%

3.2%

3.3%

3.4%

5.1%

5.6%

6.8%

4.9%

BHP Billiton Marketing Asia Pte Ltd

Deutsche Bank Aktiengesellschaft

BNP Paribas

Drew & Napier LLC

Barclays Capital Service Limited Singapore Branch

UBS AG

Ernst & Young Services Limited

Telstra Corporation Limited

Standard Chartered Bank

Australia and New Zealand Banking Group Ltd

Top Ten Tenants

Australia and New Zealand Banking Group

Standard Chartered Bank

Telstra Corporation

Ernst & Young

UBS

Barclays

Drew & Napier

BNP Paribas

Deutsche Bank

BHP Billiton

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New Tenants - Office

24

Some of Keppel REIT’s new tenants

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New Tenants - Retail

25

Before

» Location: Marina Bay Link Mall

» A 20-seat café serving 12 or 13 pizza options which change every 80 days

» Location: Bugis Junction Towers

» Subdivided existing retail shop into two units to introduce a café serving Peranakan delights

HarriAnns Nonya Table

Eighty Days

After

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Tenant Engagement

» Venue partner for root, an art exhibition featuring local young artists and providing them opportunities to showcase their works

Ocean Financial Centre

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» Monthly lunchtime performances

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Community Engagement

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» Fifth consecutive year that Keppel REIT is reaching out to the children at MINDSville@Napiri

» Equipping the children with daily skills through a two-course cooking session

Partnership with MINDSville@Napiri

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\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ 5. Market Review and Outlook

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Marina Bay Financial Centre,

Singapore

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Office Market Review – Singapore

1

1 Source: CBRE 29

» Demand in the quarter was mainly from the insurance, energy and commodities, e-commerce and IT sectors

» Leasing demand from Asia Pacific financial institutions continued to be robust

» Average core CBD occupancy increased to 95.8%, and average monthly Grade A office rents grew 3.4% q-o-q to reach $10.60 psf

$10.60 $11.06 $11.00

$10.60 $10.10

$9.80 $9.58 $9.55 $9.55 $9.55 $9.75 $10.25

$10.60

93.1% 92.3% 91.2% 90.7% 91.6%

93.2% 92.2%

93.2% 95.0%

93.5% 95.2% 95.7% 95.8%

50%

60%

70%

80%

90%

100%

$-

$3

$6

$9

$12

$15

Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14

Core

CBD

Occupancy

Avera

ge G

rade A

Off

ice R

enta

l ($

psf

pm

)

Average Grade A Rental ($ psf pm) Core CBD Occupancy

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Market Outlook

» Economy is expected to grow 2.1% y-o-y in 2Q 2014

» Leasing activities and enquiries remained steady through

2Q 2014, especially in the CBD

» The upside in rent is likely to continue for the rest of this year

and 2015 given low vacancy levels, limited new supply and

moderately positive demand

Singapore

» Economy recorded a 3.5% GDP growth in 1Q 2014

» Cash rate remains at 2.5% and interest rates are likely to maintain

at current levels

» Moody's affirmed Australia's Aaa credit rating with a stable outlook

Australia

30

Source: Ministry of Trade and Industry, CBRE

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\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ 7. Additional Information

Old Treasury Building Office Tower,

Perth

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2006 2007 2009 2012 2013

Renamed

2011 2010 32 2014

$630.7 m

listed in April

• Maiden

acquisition:

One Raffles

Quay

• Strategically

located at

Marina Bay

$2.1 billion

• First third-

party

acquisition:

Increased

stake in

Prudential

Tower

$2.1 billion $3.5 billion

• First overseas

acquisition

• First SREIT to

qualify for MIT

structure

• First strategic

asset swap to

acquire

MBFC Phase 1 $6.0 billion

• First forward

funding

acquisition

structure

• First SREIT to

structure LLP

to hold assets

$6.5 billion

• Increased

interest in OFC

to 99.9%

• Obtained tax

transparency

for MBFC Phase 1

• Switched to

quarterly

distributions

• Acquisition of

the new office

tower at the

Old Treasury

Building in

Perth, WA

$6.8 billion

• Announced the

acquisition of

8 Exhibition

Street in

Melbourne

More than

$7.2 billion

• Announced

divestment of

stake in

Prudential

Tower

(completion in

Sept 2014)

Growth History

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(1) Tenants with multiple leases accounted as one tenant . (2) Valuation as at 31 December 2013 based on Keppel REIT’s interest in the respective properties unless otherwise stated. (3) Refers to Keppel REIT’s one-third interest in Marina Bay Financial Centre Towers 1 & 2 and Marina Bay Link Mall, and a one-third interest in One Raffles Quay.

Ocean Financial Centre

Marina Bay Financial

Centre Phase One(3)

One Raffles

Quay(3) Prudential Tower Bugis Junction

Towers

Description

43-storey premium Grade A office

tower

A pair of 33 and 50 storey premium Grade

A office towers and subterranean mall

A pair of 50 and 29 storey premium Grade A office

towers 30-storey Grade A

office tower 15-storey Grade A

office tower

Attributable NLA (sf) 884,525 581,626 445,230 221,080 244,987

Ownership 99.9% 33.3% 33.3% 92.8% 100.0%

Number of tenants(1) 47 91 36 39 15

Principal tenants

ANZ, BNP Paribas,

Drew & Napier

Barclays Capital, BHP Billiton,

Standard Chartered Bank

Royal Bank of Scotland,

Deutsche Bank, UBS

Prudential Assurance Singapore,

UniCredit Bank, Compass Office

IE Singapore, InterContinental

Hotels Group, Keppel Land

Tenure 99 years expiring

13 Dec 2110 99 years expiring

10 Oct 2104 99 years expiring

12 Jun 2100 99 years expiring

14 Jan 2095 99 years expiring

9 Sep 2089

Valuation(2) ($ million) 2,515.0 1,609.0 1,200.0 490.0 504.8

Committed occupancy 99.4% 100.0% 100.0% 100.0% 100.0%

» AUM of more than $7.2 billion as at 30 June 2014 » More than 92% of the Singapore portfolio is located in the Raffles Place and Marina Bay precincts » 87% of portfolio in Singapore, and 13% in Australia

Portfolio Information

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(1) Tenants with multiple leases accounted as one tenant. (2) Valuation as at 31 December 2013 based on Keppel REIT’s interest in the respective properties unless otherwise stated and based on the exchange rate of A$1 = S$1.174. (3) Pre-committed leases. (4) The 99 year leasehold tenure will commence on the date of practical completion of the property.

8 Chifley

Square, Sydney

77 King Street

Office Tower,

Sydney

8 Exhibition

Street,

Melbourne

275 George

Street, Brisbane

Office Tower to be

built at the Old

Treasury Building site,

Perth

Description 34-storey Grade A

office tower 18-storey Grade A

office tower 35-storey Grade A

office tower 30-storey Grade A

office tower

33-storey Grade A office tower scheduled

for completion in 2H 2015

Attributable NLA (sf)

104,050 147,980 241,784 224,688 165,685

Ownership 50.0% 100.0% 50.0% 50.0% 50.0%

Number of tenants(1) 7 12 17 8 1

Principal tenants

Corrs Chambers Westgarth,

QBE Insurance Group, Quantium Group

Apple, Facebook,

Capgemini Australia

Ernst & Young, UBS,

AECOM Australia

Queensland Gas Company, Telstra

Corporation

Government of Western Australia (3)

Tenure 99 years expiring

5 Apr 2105 Freehold Freehold Freehold 99 years(4)

Valuation(2) (S$ million) 202.5 146.8 198.7 225.4 131.5

Committed occupancy

97.0% 92.1% 100.0% 100.0% 98.2%

Portfolio Information

34

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One Raffles Quay,

Singapore

Thank You